Prime minister says, with hindsight, he would not have brought ex-News of the World editor into No 10

Prime minister David Cameron, flanked by Nick Clegg, told the Commons he would make a 'profound apology' if it emerged that Andy Coulson lied over his involvement in illegal phone hacking. Photograph: Reuters

David Cameron finally broke with Andy Coulson on Wednesday when he expressed regret for the furore caused by his decision to bring the former News of the World editor into Downing Street, an appointment he would not have made "with 20/20 hindsight".

Weeks after insisting that his former director of communications remained a friend, the prime minister promised to make a "profound apology" if it emerges that Coulson lied over his involvement in illegal phone hacking.

Cameron, who was accused by Ed Miliband two weeks ago of a "catastrophic judgment" in appointing Coulson as the Downing Street director of communications despite warnings about his past at the News of the World, pre-empted a renewed attack by distancing himself from his former aide. The prime minister said: "I regret, and I am sorry about, the furore it has caused. With 20/20 hindsight and all that has followed, I would not have offered him the job, and I expect that he would not have taken it. But you do not make decisions in hindsight; you make them in the present. You live and you learn and, believe you me, I have learned."

Cameron has stood by Coulson in recent weeks after the Guardian reported on 4 July that the phone of Milly Dowler was targeted while he was deputy editor of the NoW. When Miliband accused Cameron on 6 July of having made a "catastrophic judgment" in bringing Coulson into No 10, the prime minister said he took responsibility for everyone he employs.

Two days later, the prime minister said he still regarded Coulson as a friend. Speaking at a Downing Street press conference on 8 July, hours after Coulson was arrested, the prime minister said: "He became a friend and is a friend."

Last week, Cameron said he had sought assurances from Coulson about the phone-hacking allegations. Coulson, who resigned as editor of the NoW after the jailing of the paper's former royal editor in 2007, told the prime minister he had no knowledge of illegal phone hacking.

Cameron went further on Wednesday when he said Coulson could have perjured himself – a reference to his testimony in the Tommy Sheridan trial when he denied any knowledge of illegal payments to police officers. The prime minister said: "I have said very clearly that if it turns out that Andy Coulson knew about the hacking at the News of the World, he will not only have lied to me, but he will have lied to the police, a select committee and the Press Complaints Commission, and of course perjured himself in a court of law. More to the point, if that comes to pass, he could also expect to face severe criminal charges.

"I have an old-fashioned view about innocent until proven guilty. But if it turns out I have been lied to, that would be the moment for a profound apology. In that event, I can tell you I will not fall short."

The prime minister added that he took full responsibility for hiring Coulson, who did a good job for him between 2007 and his resignation in January this year. "My responsibilities are for hiring him and for the work he did in Downing street. On the work he did, I repeat, perhaps not for the last time, that his work at Downing street has not been the subject of any serious complaint and, of course, he left months ago. On the decision to hire him, I believe that I have answered every question about that. It was my decision. I take responsibility."

Miliband accused the prime minister of ignoring five warnings about Coulson. The Labour leader said: "The country has a right to expect that the prime minister would have made very effort to uncover the information about Mr Coulson to protect himself and his office, yet the pattern of events suggests the opposite – that the prime minister and those around him made every effort not to hear the facts about Mr Coulson."

The Labour leader challenged Cameron to intervene on him as he highlighted one of the warnings – a New York Times article last September that quoted a former News International editor saying Coulson knew about the hacking. The prime minister declined to look up at Miliband.

The Labour leader said: "The prime minister was caught in a tragic conflict of loyalty between the standards and integrity that people should expect of him and his staff, and his personal allegiance to Mr Coulson. He made the wrong choice. He chose to stick with Mr Coulson.

"He says that in hindsight he made a mistake by hiring Mr Coulson. He says that if Mr Coulson lied to him, he would apologise. That is not good enough. It is not about hindsight or whether Mr Coulson lied to him; it is about all the information and warnings he ignored. He was warned, but preferred to ignore the warnings. So that the country can have the leadership we need, why does he not do more than give a half apology and provide a full apology now for hiring Mr Coulson and bringing him into the heart of Downing Street?"

Cameron's five opportunities

Ed Miliband said there were five opportunities "for the prime minister or his staff to act on specific information that would surely have led him to change his mind" about Coulson. The five were:

• Ed Llewellyn, David Cameron's chief of staff, was told in February 2010 by the Guardian that Coulson had hired a convicted criminal to work at the NoW. This person was accused of making payments to police on behalf of the paper.

• In May 2010 Nick Clegg warned the PM about appointing Coulson as director of communications at No 10.

• On 1 September 2010 a New York Times article quoted "multiple sources" saying Coulson knew about hacking.

• The NYT article prompted the Met to reopen its inquiries.

• The Met's John Yates then offered to brief Llewellyn, but this was spurned. The article led to the end of the Met contract of ex-NoW deputy editor Neil Wallis.

Cameron received a warmer reception later in the day when he addressed Conservative MPs on the 1922 committee, who banged their desks for 40 seconds as he described his actions on phone hacking as "decisive, frank and transparent".

Tory MPs did not ask any questions about phone hacking as they concentrated on the crisis in the eurozone. Cameron said Britain should welcome any attempts to create greater fiscal unity in the eurozone because Britain would be able to win benefits in the treaty negotiations that would approve any change.